Ncdex told to put January chilli contract on hold

The Forward Markets Commission (FMC) has told the National Commodity & Derivatives Exchange (Ncdex) not to launch the January contract for chilli till it settles the issues related to the quality of the crop.

The Guntur buyers are getting restive, even as 4,000 tonne of rotten chillis, meant for delivery for the November contract, have been cleared from the warehouses here.

The FMC made it clear that any loss caused to the buyers should be compensated from the Trade Guarantee Fund of the exchange, which runs into hundreds of crores of rupees.

Prabhakar R Patil, director, FMC, said the buyers need not take delivery for the December contract if the crop does not satisfy the quality specifications.

He asked the buyers to get the crop checked by a third party before accepting or rejecting it and inform their decision to the FMC.

Patil added that before the national exchanges appeared, about 250 small and illegal commodities exchanges were operating all over the country. Now, all of them have disappeared.

All said and done, farmers are benefiting, as prices of various crops jumped up and stabilised after the national exchanges were started in 2003.

Now, with a turnover of Rs 24,76,000 crore in the financial year so far, the business at the commodities exchanges may double that recorded last year, he said.

A Bill to amend the Forward Contracts Regulation Act (FCRA) of 1952, which aims at regulating commodities exchanges in the country, has been pending in the Parliament for over a year.

If the Bill is passed and becomes a stringent Act, it will soon streamline commodities exchanges. Another Bill to amend the Warehousing Act, if passed, will streamline the operations of warehouses and liquidate corrupt warehouses and testing labs, Patil said.

"Most of the buyers and investors, who take part in commodities exchanges, know nothing of the rules and procedures. This has been a major problem. The aggrieved Guntur traders have not directly approached the FMC.

Despite appeals, they have not enrolled with the FMC as members. Observing a 32 per cent disparity between futures and spot prices in chilli in Guntur from October 20, the FMC, on its own, intervened to solve the crisis of confidence created by the Ncdex franchisees "� the warehouses and the laboratory "� in Guntur," Patil said.

Ncdex should replace the rotten chillis with the good quality ones. Any other piecemeal settlement is unwelcome, as it would set a bad precedent, leading to chaos in the market, he added.